Interferons (IFNs) are widely used in the treatment of cancers, virus infections, and autoimmune diseases. One of the cellular responses to IFN treatment is the activation of protein modification by ISG15. ISG15 is a 15kDa protein encoded by an IFN stimulated gene (ISG) and can modify other proteins. We have cloned a novel gene encoding a protease UBP43 that specifically removes ISG15 from ISG15 modified proteins. Furthermore, we have generated UBP43 knockout mice. UBP43 deficient hematopoietic cells have much higher levels of ISG15 modified proteins and are hypersensitive to IFN treatment. Most importantly, in contrast to wild type bone marrow cells with BCR/ABL expression that rapidly develop a myeloproliferation disorder resemble human CML, mice transplanted with BCR/ABL expressing UBP43 deficient bone marrow cells have a significantly delayed development of CML like disease. In addition, IFN resistant BCR/ABL expressing leukemic cells do not have normal levels of ISG15 modification following IFN stimulation. These findings suggest possible roles for UBP43 and ISG15 in the control of CML development and suggest that they may serve as potential therapeutic targets to enhance the efficacy of IFN-based treatments. We hypothesize that: (1) an increase of ISG15 modification in response to IFN is critical to the efficacy of IFN, and (2) inhibition of UBP43 protease activity resulting in increased ISG15 modification will significantly increase the efficacy of IFN in the treatment of CML. To test the two hypotheses, we have developed three specific aims. The first specific aim is to demonstrate that protein ISGylation is crucial for IFN function in CML treatment. The second specific aim is to analyze the effects of UBP43 on CML development. The third specific aim is to study the effect of protein ISGylation on BCR/ABL signal transduction. These studies will provide valuable insight in determining whether protein ISG15 modification plays a crucial role in IFN-based treatments of CML. The proposed work may be important for the identification of novel and effective regimens to treat CML patients with differing genetic backgrounds as well as to treat other interferon responsive cancers, virus infections, and autoimmune diseases.